Economics professor at Barcelona University and authority on the Spanish property market, Gonzalo Bernardos, forecasts a soft patch for the market over the next 12 months, with business picking up again in the second half of 2024.

Speaking at a real estate trade event in Madrid, Gonzalo Bernardos said home sales and house prices will fall in 2024, but the trend will start to improve as next year progresses. He estimates that sales will fall 15pc this year compared to last year’s boom, and that prices, though stable for now, will soon start to trend down. He forecasts a decline in sales of 10pc in 2024, and a price decline of 3pc, as the market is dragged down by tighter mortgage financing conditions.

“Spain has entered into a real estate recession as household purchasing power has declined, even though the tourism sector’s output has increased and the economy hasn’t contracted, because the evolution of home sales doesn’t depend on employment so much as the evolution of credit,” explained Bernardos.

Interest rates have risen (see chart below), and banks are looking to reduce their exposure to real estate in the expectation of rising mortgage defaults. “Even though financial institutions are enjoying record results they are no longer offering mortgage LTVs of 90 to 100pc,” he said. “They will now only finance 80pc, and only to borrowers with an income of three times the mortgage quota.”

As a result of tighter financing conditions, the market share of foreign buyers is increasing in the most popular destinations. “That’s why in cities like Barcelona and Madrid the presence of foreigners is growing in importance, because local demand is declining,” he said.

Economic problems on both sides of the Atlantic, with Germany already in recession, and the US flirting with it, mean that interest rates are likely to start declining next year, which will help the housing market recover in the second half, argues Bernardos, who forecasts that Eurozone interest rates will end next year down at 3.5pc, compared to 4.5pc today.

Bernardos also had critical words to say about current government policy aimed at increasing the supply of affordable housing (and attracting young voters) that will not deliver the desired results. He argued that the shortage of new homes will continue for the foreseeable future, adding that “the development of land for building new homes has only taken place in the metropolitan areas of Madrid and Málaga.”

The mismatch between supply and demand in most big Spanish cities is “crushing the middle class, asking them to pay 350,000€ for a flat of 50 sqm, prices that used to be reserved for the luxury sector,” he warned.